A Timely Lesson: Understanding How A Sale Contract Dispute May Have Serious Financial Consequences Beyond That Contract Alone

In the recent case of Sang Stone Hamoon Jonoub Co Ltd v Baoyue Shipping Co Ltd ([2015] EWHC 2288 (Comm)), Mr Justice Males provided direction on the potential liability of cargo owners to shipowners where they do not take delivery of the cargo and the recompense such shipowner may expect in return. In this case, the unpaid FOB seller of the goods (who held the bills of ladings) was found liable to the shipowner for storage charges greater than the value of the unpaid cargo.

The Facts

The claimant seller was the shipper of 35,376.611mt of iron ore onboard the defendant shipowner's vessel, the "Bao Yue", from Bandar Abbas in Iran to Tianjin in China in 2012.

The bill of lading

The bill of lading, issued by the defendant shipowner, was issued "to order" and did not name a consignee or notify party. The bill of lading incorporated the terms of the applicable voyage charterparty, including that:

the shipowner was entitled to discharge the cargo "to custom bonded warehouse area against Charterer's single LOI"; and "in the event cargo being kept in warehouse in lieu of waiting for [original bill of lading] to arrive at the discharge port, the expense of warehouse and all relevant costs to be for Chrtrs' account...". The sale contract

The sale contract had been concluded on FOB terms between the claimant seller‎ and Teda Qisheng Mineral Products Import & Export Trading Co Ltd as buyer. The "Bao Yue" was the third shipment of cargo under an agreement settling an earlier dispute between the parties in December 2009.

However, a further dispute arose between the parties: the total price of the "Bao Yue" cargo was US$ 1.2 million, of which some 70% had already been paid to the seller by the buyer, leaving a balance of approximately US$ 330,000.

The bill of lading was issued but, instead of being sent to the buyer, was retained by the seller in Iran. A week before the vessel was due to arrive in China, the buyer (who was also the charterer) demanded release of the bill of lading while maintaining that it owed no further monies.

Discharge of the cargo

Upon the vessel's arrival, no bill of lading was presented, it still being locked in the seller's safe in Iran. The defendant shipowner discharged the cargo into custom bonded warehouses via the agent in China, Tianjin Star Ship Agency Co Ltd ("Star Ship"). The bonded warehouse was operated by Tianjin QS Storage & Transportation Co Ltd ("TQST"), a company within the same group as the buyer. Star Ship was...